Side Effects

PBM executives blame drug manufacturers for high prescription prices

WASHINGTON — Executives of the leading pharmaceutical benefit manager companies blamed drug-makers for the high prices of prescription drugs.

The head of OptumRX accused drug companies of “anti-competitive tactics” to delay introduction of less expensive generic drugs.

Testifying Tuesday before the Senate Finance Committee, the executives sharply objected to claims that rebates paid by the manufacturers to the pharmacy benefit managers do not get passed on to consumers facing rising drug prices.

Mike Kolar, the interim president and chief executive officer of Prime Therapeutics, said in prepared testimony, that he “disputes the idea that rebates are the primary cause of high list prices. Indeed, many drugs have high and significantly increasing list prices without offering any rebates.”

Ohio Democratic Sen. Sherrod Brown, a member of the Senate panel, told the PBM executives: "It's not exactly breaking news that Ohioans don't trust pharmacy benefit managers ... I can't say I blame them."

Senate Finance Committee Chairman Charles Grassley, R-Iowa, said in his opening statement the “current system is so opaque that it’s easy to see why there are many questions about PBMs’ motives and practices.”

“One question we must ask is whether PBMs prefer a high-cost drug with big rebates over a cheaper drug,” Grassley said in his prepared remarks. “Some even argue that PBMs force drug companies to raise their list price.”

The hearing once again highlighted the split between drug manufacturers and pharmacy benefit managers on who is to blame for rising prescription prices.

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Pharmacy benefit managers insist on rebates from the manufacturers in return for including their drugs in pre-approved health care plans. Critics charge the pharmacy benefit managers pocket some of the rebates or other money obtained from drug manufacturers rather than passing them all to the consumer.

In February before the same Senate panel, the senior executives of seven major pharmaceutical companies said they could lower drug prices if the Donald Trump administration adopts a proposed rule that would eliminate rebates paid by the manufacturers to middlemen in the drug supply chain, primarily pharmacy benefit managers.

The billions made by PBMs has been the topic of a year-long investigation by The Dispatch, which has helped spur sweeping changes in Ohio.

U.S. Health and Human Services Secretary Alex Azar has proposed a rule that would enable drug manufacturers to pass rebates and other discounts directly to consumers. He called the money going to PBMs "a hidden system of kickbacks to middlemen." The rebates represent 26 to 30 percent of a drug’s list price, Azar said.

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The HHS proposal would specifically remove "safe harbor" protections from the Anti-Kickback Statute for rebates paid by manufacturers to PBMs and Medicaid managed care organizations. The plan would create a new safe harbor for prescription drug discounts offered directly to patients, as well as fixed fee service arrangements between drug manufacturers and PBMs.

Portman, who cited the Dispatch series as he questioned John Prince, chief executive officer of OptumRx, and Derica Rice, Executive Vice President of CVS Health and CVS Caremark.

Ohio Attorney General David Yost last month sued OptumRx to recover $16 million in overcharges to the state for prescription drugs. Yost demanded repayment after first seeking mediation in the dispute on behalf of the Bureau of Workers’ Compensation, which hired OptumRx to manage pharmacy benefits for injured workers.

"Wouldn’t transparency solve a lot of this particular with regard to the rebates?" Portman asked.

Rice replied that he shared Portman's "interest in making sure that we bring the utmost level transparency to not only the plan and but also to the members and the constituencies and consumers in your state as well as other states.'

"The things that we have done have been validated through the independent audit report that was conducted as well," Rice said. "I think we saved the state about $145 million. In the course of that we’ve now made a decision as of January 1 of this year that that we no longer have spread pricing," adding "we pass through 100 percent of the rebates and discounts."

Prince insisted "we have delivered against our contract for the state and also for the bureau. I am not going to go into the details in the litigation here. But I guess I would say overall we are working closely with them to resolve the matter."